Analysing the economy-wide impacts on Egypt of alternative GERD filling policies
The construction of the Grand Ethiopian Renaissance Dam (GERD) on the Blue Nile stands to greatly benefit Ethiopia, but its filling will have impacts on Nile inflows to Egypt. In response, Egypt has concerns that these impacts on Nile flows will have significant effects on the Egyptian economy. Despite these concerns, the extent to which Egypt’s economy will be affected by GERD filling has not been evaluated. This study couples three models to analyse how GERD filling combined with variable Lake Nasser inflows will impact Egypt’s hydropower generation and irrigation deliveries over a future twenty-year period, and how these will affect economy-wide indicators including GDP. Models include a water systems model of the Nile upstream of Lake Nasser (including the GERD), a water management model of the Egyptian water system and a computable general equilibrium (CGE) model of Egypt’s economy. Given that future Nile inflows are unknown, the study employs a risk-based approach, where 100 synthetically generated hydrology time series are processed through the modelling system to generate probability density functions of hydropower generation and economy-wide indicator outputs. We find that under a ‘worst-case’ GERD filling scenario, the 5th percentile of the 100 Nile inflows to Egypt reduces hydropower generation at the High Aswan Dam by 10 per cent per year over the first three years, which when routed through the CGE model translates to a GDP impact of 0.13 per cent (US$380 million based on 2014 GDP). Impacts on Egypt fall sharply after GERD filling is completed. On the other hand, considering energy benefits to Ethiopia alone, the GERD would produce over $1 billion per year in sustained hydropower revenues, suggesting that there may be room for benefits sharing.